Event-Driven

Four years after Itochu got to 40.0% of votes in Descente (8114) in a hostile Tender Offer, Descente partner ANTA, which supported Itochu at the time started selling its stake.
A few months later, Itochu started buying shares of Descente in the market. As of 7 Sep, Itochu had bought Descente shares 81 days straight (9.7% of ADV).
This begs the question: Is Itochu ensuring they maintain voting control as ANTA sells? Or are they buying to lift their stake prior to another bid?

Quiddity A/H Premium Weekly (15-Sep): Utilities, Insurance, China Mobile, BYD

The Brand-Spanking New (6 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning in pairs over time, etc.
We used to do it and decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 41 Trade Recommendations.
The last five weeks (since the instantiation of the new Monitor and Portfolio 6 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%.

Wharf Holdings (4 HK): Improved Liquidity & Passive Buying

Improved liquidity and a higher stock price could see passive trackers buying Wharf Holdings (4 HK) within the next couple of months.
Wharf Holdings (4 HK) trades cheaper than the average and median of its peers on EV/Sales, EV/EBITDA and price to book value.
Wharf Holdings (4 HK) has already started to move higher and there could be a bigger move in the stock over the next month.

SK Telecom (017670 KS): Foreign Room & Passive Inflows

Foreign room in SK Telecom (017670 KS) increased above 15% in July and is currently just above 16%. Foreign investors have resumed buying again and foreign room is moving lower.
Foreign room staying above 15% for another month could result in passive buying at the end of November. SK Telecom (017670 KS) has outperformed peers over the last few weeks.
Foreign buying over the next month could lead to foreign room dropping below 15% in which case there will be no passive inflows. But the stock could be higher.

Merger Arb Mondays (18 Sep) – Eoflow, Costa, Liontown, Pact, T&K Toka, IMAX, Poly Culture

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 111 Inc (YI US), Eoflow (294090 KS), Symbio Holdings (SYM AU), Costa Group Holdings (CGC AU), Orecorp Ltd (ORR AU), Mason Group Holdings (273 HK), JSR.
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Yaizu Suisankagaku Industry (2812 JP), Pacific Current (PAC AU), Pact Group Holdings (PGH AU), T&K Toka Co Ltd (4636 JP).

SET50 Index Rebalance Preview: Two Potential Changes in December

There could be two changes for the SET50 INDEX with JMT Network Services (JMT TB) and I-TAIL (ITC TB) replacing Srisawad Power (SAWAD TB) and Ngern Tid Lor (TIDLOR TB).
With no further inclusions on the Market Surveillance Measure list, Delta Electronics Thai (DELTA TB) should be safe at the December rebalance.
There are a couple of stocks that are close to passing/failing the liquidity tests and that could result in further changes to the index.

Costa Mulls Paine Schwartz’s Lower Bid

Back on the 4 July, Paine Schwartz Partners (PSP) made an A$3.50/share NBIO for Costa Group (CGC AU) by way of a Scheme. PSP held 14.84% at the time.
The due diligence period came and went, or so it appeared, but Costa said it remained ongoing. Rumours circulated that PSP had gone cold. 1H23 results were also delayed.
Costa has now announced this morning that PSP has returned with a $3.20/share Offer – best and final – reduced for any permitted dividend of up to A$0.04, if declared.

EQD | KOSPI 200 Index WEEKLY OVERBOUGHT (Or Break-Out Rally?)

The KOSPI 200 INDEX WEEKLY did rise last week and is approaching OVERBOUGHT territory based on the current short-term trend pattern (Q3 resistance is at 346).
The current pattern is bearish, but if the market gains momentum and rallies for 2 more weeks, it could reach 357 during the 3rd week up (not earlier).
The alternative scenario, a better fit for this bearish pattern, is that the index starts to pull back this week, or remains weak this week and falls the next.

EQD | VIX Index WEEKLY Suggests Upcoming Increase in Volatility

The VIX INDEX is currently OVERSOLD from a time perspective, but not yet from a price perspective: if it falls <13, there is a high probability it will reverse up.
A spike in the VIX will correspond to a drawdown in equities, globally. The MRM model indicates a 1-2 weeks duration for the event, price targets between 16 and 18.
After the spike, the VIX could start to fall again, so this upcoming volatility spike should be a brief, short-lived event.

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Sep 17

Daily Brief Event-Driven: Last Week in Event SPACE: Japan Post and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Last Week in Event SPACE: Japan Post, Sun Hung Kai, LVS/Sands China, Kenedix REIT Complex, JFE
Quiddity Mainland Connect NORTHBOUND Flows (Week to 15Sep23) : Zhongzhi Innolight, BYD, and Amperex
Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, CSI500, STAR50, FnGuide Top10
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Central Banks Decide
Quiddity Leaderboard ChiNext & ChiNext 50: A Potential Basket Trade
Quiddity Leaderboard CSI 300/500 Dec 23: US$2.8bn One-Way; Might Be Time for a Basket Trade
Quiddity Leaderboard SSE50/180 Dec 23: US$937mn One-Way; Some Changes to Expectations
Quiddity Leaderboard STAR 50 Dec 23: One ADD and One DEL; Ninebot Could Underperform AIMA
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Origin, United Malt, T&K Toka, Golden Eagle Energy, JMDC
Quiddity HK Connect SOUTHBOUND Flows (Week to 15Sep23) Banks, Real Estate, Telcos, and Big ETF Sales

Last Week in Event SPACE: Japan Post, Sun Hung Kai, LVS/Sands China, Kenedix REIT Complex, JFE

The Japan Post Holdings (6178 JP)/ Japan Post Bank (7182 JP) ratio looks more attractive as JPB climbs with other banks as the possibility of Offering-induced retail overhang increases.
The ACCC has until 28 September 2023 to make its decision on Origin Energy (ORG AU). Expect ACCC to be supportive – they haven’t built a strong “against” case.
There should be more for the Kenedix REIT complex on a fundamental basis, a future equity capital raise accretion basis, and because of significant net buying for index purposes.

Quiddity Mainland Connect NORTHBOUND Flows (Week to 15Sep23) : Zhongzhi Innolight, BYD, and Amperex

This is the brand spanking new Quiddity Mainland Connect NORTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor.
The data on liquid names is presented for 5 days and four weeks and anything seen can be ranked in tables or selected and charted (names, sectors, outperformance, etc).
We like the nifty interactive tables and charts and welcome feedback. This week saw RMB 15bn+ of net selling. That’s six weeks in a row of respectably large outflows.

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, CSI500, STAR50, FnGuide Top10

It was a busy Friday with a bunch of indices rebalancing at the close and big volumes trading on a lot of stocks.
Brilliance China Automotive (1114 HK) had a good week with the stock rallying on Thursday and Friday on huge volumes amid expectations of upcoming passive buying.
A quiet week for ETFs with mainland China ETFs seeing some outflows after the huge inflows over the last couple of months.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Central Banks Decide

By Simon Harris

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

Quiddity Leaderboard ChiNext & ChiNext 50: A Potential Basket Trade

The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
In this insight, we take a look at the names leading the race to become ADDs and DELETEs in the December 2023 Rebalance.

Quiddity Leaderboard CSI 300/500 Dec 23: US$2.8bn One-Way; Might Be Time for a Basket Trade

CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
In this insight, we take a look at the potential ADDs/DELs for the CSI 300 and CSI 500 rebalance in December 2023.
Our latest estimates show that the combined one-way flow for CSI 300 and CSI 500 could be around US$2.8bn.

Quiddity Leaderboard SSE50/180 Dec 23: US$937mn One-Way; Some Changes to Expectations

SSE 50 and SSE180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on Shanghai Stock Exchange.
In this insight, we take a look at our expectations for potential index changes for SSE 50 and SSE 180 during the December 2023 Rebalance event.
I currently expect 5 ADDs/DELETEs for the SSE 50 index 18 ADDs/DELs for the SSE 180 index. Some of these names are different from my previous expectations.

Quiddity Leaderboard STAR 50 Dec 23: One ADD and One DEL; Ninebot Could Underperform AIMA

STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the December 2023 Rebalance event.
I currently expect one ADD and one DEL for the STAR 50 index in December 2023.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Origin, United Malt, T&K Toka, Golden Eagle Energy, JMDC

I tally 50 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Four new deals this week: Pact Group Holdings (PGH AU); Golden Eagle Energy (SMMT IJ); Takisawa Machine Tool (6121 JP); and JMDC (4483 JP).
Key updates took place for: Origin Energy (ORG AU), United Malt (UMG AU), Liontown Resources (LTR AU), Poly Culture (3636 HK), IMAX China Holding (1970 HK), and T&K Toka (4636 JP).

Quiddity HK Connect SOUTHBOUND Flows (Week to 15Sep23) Banks, Real Estate, Telcos, and Big ETF Sales

This is the brand spanking new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
The data on liquid names is presented for 5 days and four weeks and anything seen can be ranked in tables or selected and charted (names, sectors, outperformance, etc).
We like the nifty interactive tables and charts and welcome feedback. This week saw RMB 15bn+ of net selling. That’s six weeks in a row of respectably large outflows.

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Sep 16

Daily Brief Event-Driven: Latest Development & Potential First Target of Mandatory Tender Offer in Korea and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Latest Development & Potential First Target of Mandatory Tender Offer in Korea

Latest Development & Potential First Target of Mandatory Tender Offer in Korea

Considering the progress of the legislative process at this juncture, the effective date could be as early as the end of this year or, at the latest, early next year.
Ilooda (164060 KS) will likely become the first case. A tender offer at ₩11,000 (a 30% premium to the current price) per share for 14%+1 share may greet us.
There is sufficient value in monitoring the interaction between the offer structure and stock price movement in the context of the first application of a mandatory tender offer in Korea.

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Sep 15

Daily Brief Event-Driven: NTT’s Partial Offer for Intage (4326) Part Deux – Refining Pro-Ration Expectations and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

NTT’s Partial Offer for Intage (4326) Part Deux – Refining Pro-Ration Expectations
Kenedix J-REIT Family Merger – Still Room (And Time) To Move
JSE September 2023 Index Rebalance
SK Square: Will Alibaba Acquire 11st?
Golden Eagle Energy (SMMT IJ): Trading Wide To Terms
IMAX China (1970 HK): Risk as Scheme Vote on 10 October
Quiddity Primer for ChiNext & ChiNext 50 Index Rebalance Events
IMAX China (1970 HK)’s Offer: 10th Oct Shareholder Vote
Geminder’s Opening Salvo For Pact?
I Squared & TDR/Applus: Competing Offer at €9.75

NTT’s Partial Offer for Intage (4326) Part Deux – Refining Pro-Ration Expectations

Last week I wrote about NTT’s Partial Offer for Marketing Consultant Intage (4326) – (with a spurious hyphen at the end).
In the last couple of days, there have apparently been a few blocks printed on the tape. I have received questions about pricing and pro-ration.
So here I provide a set of 11 possible pro-ration cases, and suggest ways for traders and investors to think about the risks and possibilities.

Kenedix J-REIT Family Merger – Still Room (And Time) To Move

In mid-June, three months ago yesterday, Kenedix Office Investment Co (8972 JP), Kenedix Retail REIT (3453 JP), and Kenedix Residential Investment (3278 JP) announced a three-way merger for Nov1.
All three popped in price, and peaked three weeks later, both outright and vs Peers. Then it fell sharply back.
It is worth looking at the new Combined “KDX” entity on a pro-forma basis. There should be more to go.

JSE September 2023 Index Rebalance

By Charlotte van Tiddens, CFA

JSE indexes will be rebalanced in the closing auction tomorrow.
MCG will fall out of the TOPI and DTOP and HAR will enter. The ALSI gets reviewed semi-annually in March and September.
ACL and LBR will fall out of the ALSI, ALSI SWIX and the capped variants.

SK Square: Will Alibaba Acquire 11st?

By Douglas Kim

Maeil Business Daily reported that Alibaba Group Holding (9988 HK) is considering on acquiring a controlling stake in 11st, which is a leading e-commerce platform owned by SK Square
In 2018, 11st was valued at 2.7 trillion won by financial investors. However, the current valuation of 11st is estimated to have declined to about 1 trillion won (US$760 million).
We estimate that the probability of Alibaba acquiring 11st is about 60-70%.

Golden Eagle Energy (SMMT IJ): Trading Wide To Terms

On the 26 July, Geo Energy Resources (GERL SP) announced an agreement to acquire a majority stake in coal miner Golden Eagle Energy (SMMT IJ) (GEE).
Via an S&P, GEO intends to buy a 58.7% stake in Golden Eagle from Indonesian conglomerate Rajawali Group for US$154.1mn.
The completion of the S&P, which is subject to Indonesia’s OJK and Geo shareholder approval, will trigger an MTO at IDR 1,255/share.

IMAX China (1970 HK): Risk as Scheme Vote on 10 October

IMAX China Holding (1970 HK)‘s scheme document is out, with the court meeting scheduled for 10 October. The IFA considers IMAX Corp (IMAX US)‘s HK$10.00 offer fair and reasonable.
The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake.
A recovering box office, early indications of an effort to rally retail NO votes and a high minority participation rate in AGMs pose a risk. The risk/reward profile is unfavourable.

Quiddity Primer for ChiNext & ChiNext 50 Index Rebalance Events

The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
In this insight, we take a brief look at the index selection methodology and the historical price and volume performance of ChiNext and ChiNext 50 rebalance baskets.

IMAX China (1970 HK)’s Offer: 10th Oct Shareholder Vote

Back on the 13 July, IMAX China Holding (1970 HK) announced a take-private transaction from its parent IMAX Corp (IMAX US) at HK$10/share. Terms have been declared final.
The price is a 9.65% premium to last close but a 39.47% premium over the closing price on the last full trading day, suggesting apparent news leakage.
The Scheme Doc is out and independent shareholders get to vote on the transaction on the 10th October. This vote could – should – be close. Only for the brave.

Geminder’s Opening Salvo For Pact?

Plastic products manufacturer Pact Group Holdings (PGH AU) has announced an unconditional off-market takeover from its major shareholder, Raphael Geminder.
Geminder, with a current stake of 50%, is offering – via wholly-owned entity Kin Group – A$0.68/share, a paltry 0.07% premium to last close. Shares recently touched an all-time low.
The Offer is (should be) open for a month. As the bid is unconditional, there’s nothing to stop Geminder from buying shares higher, then simply lifting his Offer price.

I Squared & TDR/Applus: Competing Offer at €9.75

By Jesus Rodriguez Aguilar

On 14 September, a “competing” acquisition offer for Applus has been made by Amber Equity, a vehicle of I Squared and TDR Capital, at €9.75/share, in cash, cum dividend.
The offer represents 10.7x EV/Fwd NTM EBIT and a 2.6% increase over Apollo’s offer, which seems to signal Amber will not raise its offer by much more.
I believe there will be an increased offer from Apollo, probably at least around €10/share (c. 2.6% increase). I’d be long Applus.

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Sep 14

Daily Brief Event-Driven: T&K TOKA (4636) Gets More Interesting – A Bump Is Now A Distinct Possibility and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

T&K TOKA (4636) Gets More Interesting – A Bump Is Now A Distinct Possibility
Nidec (6594) Turns Vinegar to Wine as Takisawa Machine Tool (6121) Agrees To Takeover
T&K Toka (4636 JP): Possible Offer Scenarios as Dalton Ups Its Stake
SK Innovation: Update on Its Rights Offering Subscription Allocation
A Fresh Short-Selling Target in Korea: Youlchon Chemical
Pact Group (PGH AU): Raphael Geminder’s Opportunistic Proposal
Mellby Gård/Duni: Start of Mandatory Offer Period
STAR50 Index Rebalance Preview: Bigger Tracking AUM = Bigger Impact

T&K TOKA (4636) Gets More Interesting – A Bump Is Now A Distinct Possibility

Last year, 20% owner Dalton approached T&K Toka Co Ltd (4636 JP) for an MBO, but walked when questioned. Then in January bid ¥1300 to double their stake to 44%.
They were not successful. The firm held a beauty contest. Bain won at ¥1400 despite ¥1300 getting no response and markets up big since. It’s possible not everyone was invited.
Since the Bain deal announcement, the stock has mostly traded at/through terms. Now we find out Dalton has been buying (now 23.77%). This increases the chances of a bump.

Nidec (6594) Turns Vinegar to Wine as Takisawa Machine Tool (6121) Agrees To Takeover

Nidec Corp (6594 JP) has had ambitions in machine tool space. They wanted to buy Takisawa Machine Tool (6121 JP) but Takisawa wouldn’t give them the time of day.
So Nidec announced hostile intentions and a 60-day period to negotiate. That’s done, and today they announced a now-friendly deal.
This looks like an easy done deal. There is one major risk factor remaining, then another consideration when thinking about path.

T&K Toka (4636 JP): Possible Offer Scenarios as Dalton Ups Its Stake

Nippon Active Value Fund/Michael 1925/Dalton has increased their T&K Toka Co Ltd (4636 JP) shareholding from 22.23% to 23.77% of outstanding shares (22.25% to 23.79% of ownership ratio including share options).
T&K Toka shares have traded above Bain’s JPY1,400 pre-conditional offer, fuelling speculation of a bump. A rival proposal at least 5% above triggers the “Counter Tender Offer” clause.
The four possible scenarios with declining probabilities are: Bain calls Dalton’s bluff, Bain marginally bumps, Dalton launches a rival offer or Dalton rollovers its stake into a privatised T&K Toka.

SK Innovation: Update on Its Rights Offering Subscription Allocation

By Douglas Kim

On 13 September, SK Innovation announced that the subscription rate for the rights offering allocated to ESOA and existing shareholders was 87.66%.
The rights offering price is 139,600 won, which is 12.7% lower than current price of 159,900 won.
There is likely to be a strong demand for the subscription of rights offering forfeited shares for the general investors scheduled to take place on 14 to 15 September.

A Fresh Short-Selling Target in Korea: Youlchon Chemical

Youlchon Chemical’s CFD balance accounts for 3.54% of SO, with approximately 2x leverage trading. It is one of the few in the top CFD balance list that can be short-sold.
Our primary concern should lie with the upcoming December rebalancing of the KOSPI 200 index. Youlchon Chemical finds itself perilously close to the borderline within the Materials sector.
When proactive flow trading targeting KOSPI 200 is set to influence prices early October, we must remain vigilant regarding the potential trades aimed at exploiting a CFD balance squeeze.

Pact Group (PGH AU): Raphael Geminder’s Opportunistic Proposal

Pact Group Holdings (PGH AU) has disclosed an unconditional takeover proposal from Raphael Geminder at A$0.68 per share, a 0.7% premium to the undisturbed price (12 September).
Mr. Geminder’s justification for a little-to-no premium offer is based on the premise that minorities are clambering for a liquidity event to exit a no-hope situation.
The offer price is unattractive on any reasonable metric. A successful privatisation would require a bump. The shares closed 6.6% higher than the offer.

Mellby Gård/Duni: Start of Mandatory Offer Period

By Jesus Rodriguez Aguilar

On 14 August, Mellby Gård crossed the 30% threshold and announced a mandatory offer for all shares of Duni AB (DUNI SS) at SEK 98.6/share. The offer period started 12 September.
The offer represents 0.41% premium to prior day to threshold crossing. Mellby Gård doesn’t seem interested in completing a takeover, rather being able to increase its stake after offer completion.
The offer represents 0.41% premium, 6.8x EV/Fwd EBITDA, 11.1 Fwd P/E (vs. 5-year averages of 8.8x and 15.4x). Gross spread is 2.1%, I wouldn’t get involved above SEK 95.

STAR50 Index Rebalance Preview: Bigger Tracking AUM = Bigger Impact

The review period for the December rebalance ends 31 October. We expect the changes to be announced 24 November with the implementation taking place after the close on 8 December.
We expect the index committee to continue using a 6-month minimum listing history resulting in one change to the index.
One way turnover is estimated at 1.6% resulting in a one-way trade of CNY 2,259m. The impact on the deletion will be much larger than that on the inclusion.

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Sep 13

Daily Brief Event-Driven: Poly Culture (3636 HK): Trading Wide To Terms. Get Involved. and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Poly Culture (3636 HK): Trading Wide To Terms. Get Involved.
KOSDAQ150 Ad Hoc Index Rebalance: VATECH (043150 KS) Replaces Lutronic (085370 KS)
HSTECH Index Rebalance Preview: Round-Trip Trade of US$255m in December
Origin Energy: ACCC’s Concerns And Brookfield’s Quid Pro Quo
HSCEI Index Rebalance Preview: China Unicom (762) Could Replace Zhongsheng (881)
EQD | S&P/ASX200 Index Looking Bearish: Resistance Levels Reset

Poly Culture (3636 HK): Trading Wide To Terms. Get Involved.

Back on the 27 June, art and culture play Poly Culture Group Corp H (3636 HK) announced a pre-conditional privatisation at HK$8.88 per H-share.
This Offer from SOE Poly Group is by way of a Merger by Absorption, incorporating a Scheme-like vote. There is no tendering condition.
The pre-cons have now been fulfilled. The Composite Document, including the H Share Class meeting/EGM date and IFA opinion, is expected to be despatched on or before the 30 September.

KOSDAQ150 Ad Hoc Index Rebalance: VATECH (043150 KS) Replaces Lutronic (085370 KS)

Value Added Technologies (043150 KS) will replace Lutronic Corp (085370 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 14 September.
Passive trackers will need to buy over 1.5x ADV on Value Added Technologies (043150 KS). The impact is higher on Lutronic Corp (085370 KS) but the arbs will provide liquidity.
Value Added Technologies (043150 KS) appears to trade cheaper than its peers on all valuation parameters and there could be a re-rating following the index inclusion.

HSTECH Index Rebalance Preview: Round-Trip Trade of US$255m in December

With no stocks in inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in December.
Capping changes will result in a one-way turnover of a touch below 1% and that will result in a round-trip trade of US$255m.
The impact on the stocks is relatively small for now but that could increase till the end of November when the stocks will be capped.

Origin Energy: ACCC’s Concerns And Brookfield’s Quid Pro Quo

After Origin Energy (ORG AU) entered into a Scheme Implementation Deed with Brookfield Asset Management/MidOcean Energy in late March, the ACCC approval process has played out in the public eye.
And it hasn’t been all beer and Skittles for the Offerors. Not just on competition issues. But also the perceived/apparent public benefit from Brookfield’s future commitment to renewable generation.
All the while, the ACCC recently blocked ANZ (ANZ AU)’s acquisition of Suncorp Bank, and Telstra Corp (TLS AU)/TPG Telecom (TPG AU)‘s mobile network sharing deal.

HSCEI Index Rebalance Preview: China Unicom (762) Could Replace Zhongsheng (881)

Zhongsheng Group (881 HK) is a potential deletion in December and that could result in China Unicom Hong Kong (762 HK) being added to the index.
Estimated one-way turnover at the rebalance is 1.36% resulting in a one-way trade of HK$845m. Passives will need to trade over 1x ADV on both stocks.
There is a very small impact on the fair value of the HSCEI 2023 dividend futures but there will be a larger impact on the dividend futures expiring in 2024.

EQD | S&P/ASX200 Index Looking Bearish: Resistance Levels Reset

The S&P/ASX 200 (AS51 INDEX) closed down last week (CC=-1), this week is rising again, we analyze the new, reset resistance levels to see how far it can go.
Our previous, recent insight discussed the fact that the index has been locked in a range for 2 years, an uptrend may be unfolding but it must breach 7600.
The current trend pattern is bearish, the index won’t rise more than 2-3 weeks, and it would probably go not very far: 7300-7400 should be the limit

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Sep 12

Daily Brief Event-Driven: JFE Holdings (5411) – Volume Patterns Indicate Possible Squeeziness and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

JFE Holdings (5411) – Volume Patterns Indicate Possible Squeeziness
I-Ne (4933) Offering Priced, Now to a TOPIX Inclusion
Poly Culture (3636 HK): Pre-Condition Fulfilled
TOPIX Inclusions: Who Is Ready (Sep 2023)
Pinduoduo: Short Seller, Grizzly Research Raises Spyware Concerns About TEMU
Australia: S&P/ASX, REMX, GDXJ, MVA, MVW & Other Index Flows on Friday
FnGuide Top10 Index Rebalance Preview: Good Historical Performance; One Potential Change in December
StubWorld: LVS Trading “Cheap” As Macau Recovers
EQD | Hang Seng Index (HSI) Post-Typhoon WEEKLY Trend Analysis

JFE Holdings (5411) – Volume Patterns Indicate Possible Squeeziness

On 5 September, JFE Holdings (5411 JP) saw an article out of a capital raising. It was confirmed later in the day. Huge volumes traded. The stock fell sharply.
The offering supply/demand dynamics are…. complicated. The offering is to foreign instos. The net demand is probably mostly retail and index, and positioning is… also complicated.
The EPS dilution is already accounted for. The fall against Nippon Steel pretty much does it after considering the discount expected.

I-Ne (4933) Offering Priced, Now to a TOPIX Inclusion

Skincare/Cosmetics company I-NE (4933 JP) on 31 August (¥2947) announced it would move to TSE Prime on 19 September, and announced a Secondary Offering by CEO Onishi-san to get there.
There was no greenshoe provided. The stock popped. Then drifted back to ¥3025 and the Offering priced today at ¥2,934/share.
75% went to Asian/European (non-US) offshore investors, and the rest to onshore institutions, which is unusual. But now we look to the TOPIX inclusion.

Poly Culture (3636 HK): Pre-Condition Fulfilled

The pre-condition relating to Poly Culture Group Corp H (3636 HK)’s privatisation offer from Poly Group at HK$8.88 per H Share has been fulfilled.
The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). No independent H Shareholder holds a blocking stake.
The offer’s 77.6% premium to the undisturbed price and no minimum acceptance condition will help completion. At the last close and for 1 November completion, the gross/annualised spread is 7.1%/64.3%.

TOPIX Inclusions: Who Is Ready (Sep 2023)

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
Since my last insight, three new TOPIX Inclusion events have been confirmed: M&A Research Institute (9552 JP), FP Partner (7388 JP), and I-NE (4933 JP)
Separately, Core Concept Technologies Inc (4371 JP) has announced it intends to work towards a Prime Market move in the future.

Pinduoduo: Short Seller, Grizzly Research Raises Spyware Concerns About TEMU

By Oshadhi Kumarasiri

Grizzly Research’s track record, especially with accusations against well-known Chinese ADRs like NIO (NIO US), ZTO Express Cayman (ZTO US), and Gaotu Techedu (GOTU US), hasn’t been successful lately.
Despite past setbacks, the company has recently targeted another renowned Chinese ADR, PDD Holdings (PDD US).
Grizzly Research alleges that Pinduoduo’s shopping app, “TEMU,” is a harmful malware/spyware secretly extracting user data.

Australia: S&P/ASX, REMX, GDXJ, MVA, MVW & Other Index Flows on Friday

Changes to the S&P/ASX indices, REMX US, GDXJ US, MVA AU, MVW AU and other indices will be implemented at the close on Friday.
There is over +/-A$5m to trade or +/-3x ADV to trade on nearly 100 stocks and will be a huge volume day for the stocks at the close.
Use the volume on the buy and sell side to increase/reduce positions especially on the deletes where there will be liquidity to cover shorts on stocks that have dropped significantly.

FnGuide Top10 Index Rebalance Preview: Good Historical Performance; One Potential Change in December

The Mirae Asset Tiger Top 10 ETF (292150 KS) tracks the FnGuide Top 10 Index and has an AUM of over US$1bn.
We currently forecast one potential change at the next rebalance in December. There is another set of changes that could also take place.
There has been a big increase in short interest on a couple of stocks while the rise has been more gradual on the other stocks.

StubWorld: LVS Trading “Cheap” As Macau Recovers

Las Vegas Sands (LVS US) is coming up “cheap” on my monitor as Macau’s gross gaming revenue touches a new post-Covid high.
Preceding my comments on LVS are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

EQD | Hang Seng Index (HSI) Post-Typhoon WEEKLY Trend Analysis

Our previous insight correctly predicted the current pullback for the Hang Seng Index (HSI), now let’s analyze MRM WEEKLY support prices, to identify when/where a bounce could begin.
The 17835-17105 support price area is where the index should stop and bounce, however depending on the duration of the pullback the % correction could vary wildly.
If the index is about to bounce, it should bounce this week or the next, if it falls >3 weeks down, it could enter a downward spiral towards 15707.

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Sep 11

Daily Brief Event-Driven: Weekly Deals Digest (10 Sep) – JMDC and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Weekly Deals Digest (10 Sep) – JMDC, Intage, Mason, Liontown, Newcrest, ARM, Integral, Doosan, VNG
United Malt: Shareholder Vote On 12th Oct
Merger Arb Mondays (11 Sep) – Eoflow, Mason, Liontown, Newcrest, United Malt, OreCorp, MPI
KRX Sector Index Series Rebalancing: Heavy Shorting on SK Square Is Anticipated
KOSPI Size Indices – Changes in September & Implications
CSI500 Index Rebalance Preview: ETF Inflows Lead to Performance Skew
Quiddity Mainland Connect NORTHBOUND Flows (Week to 8Sep23) : BYD, ZTE, Zhongji Innolight, Amperex
EQD | Nikkei 225 (NKY) MONTHLY Trajectories Analysis

Weekly Deals Digest (10 Sep) – JMDC, Intage, Mason, Liontown, Newcrest, ARM, Integral, Doosan, VNG

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Doosan Robotics (454910 KS), ARM Holdings (1822695D US), VNG (VinaGame) (VNG US), Integral Corporation (5842 JP) IPOs and Aquila Acquisition Corporation (7836 HK) de-SPAC.
Event-Driven developments – JMDC (4483 JP), Intage Holdings (4326 JP), Mason Group Holdings (273 HK), Liontown Resources (LTR AU), Newcrest Mining (NCM AU), Orecorp Ltd (ORR AU).

United Malt: Shareholder Vote On 12th Oct

Back on the 3 July, United Malt Group Ltd (UMG AU) and Malteries Soufflet entered into a binding agreement of A$5.00/share, by way of a Scheme.
The Scheme Booklet has now been lodged with ASIC. UMG shareholders vote on the transaction on the 12 October, with implementation on the 15 November.
The Offer remains subject to FIRB and other regulatory approvals. Malteries Soufflet and UMG are the second and fourth-largest maltsters in the world.

Merger Arb Mondays (11 Sep) – Eoflow, Mason, Liontown, Newcrest, United Malt, OreCorp, MPI

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 111 Inc (YI US), Costa Group Holdings (CGC AU), Eoflow (294090 KS), Symbio Holdings (SYM AU), Mason Group Holdings (273 HK), Origin Energy (ORG AU).
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Yaizu Suisankagaku Industry (2812 JP), Liontown Resources (LTR AU), T&K Toka Co Ltd (4636 JP), Itochu Techno Solutions (4739 JP).

KRX Sector Index Series Rebalancing: Heavy Shorting on SK Square Is Anticipated

The most noteworthy developments include Samsung Electronics being newly added to the Semicon sector, while SK Square has been removed.
We must be mindful of the potential concentration of shorting flow on SK Square as most names expected to experience negative flows do not fall under the KS200/KQ150 membership.
Our strategic approach can take three directions: 1. aim at only those receiving positive flows, 2. heavy shorting SK Square, and 3. long-short the four with the most flow size.

KOSPI Size Indices – Changes in September & Implications

There are 8 migrations from MidCap to LargeCap, 7 LargeCap to MidCap, 8 new additions to MidCap, 17 SmallCap to MidCap, 23 MidCap to SmallCap, 5 new additions to SmallCap.
The migrations from SmallCap to MidCap have outperformed the stocks migrating between other segments by a huge margin over the last few months.
Given the huge outperformance and looking at how the migrations have performed historically, we’d expect the stocks migrating to MidCap to underperform post implementation of the changes.

CSI500 Index Rebalance Preview: ETF Inflows Lead to Performance Skew

Over 85% of the way through the review period for the December rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
There is a big sector skew in the potential changes. We estimate a one-way turnover of 9.4% at the December rebalance resulting in a one-way trade of CNY 7.22bn.
With the market being stabilised through the ETF route, the index constituents have outperformed the non-index constituents over the last 6-7 weeks. That could reverse over the near term.

Quiddity Mainland Connect NORTHBOUND Flows (Week to 8Sep23) : BYD, ZTE, Zhongji Innolight, Amperex

This is the brand spanking new Quiddity Mainland Connect NORTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor.
The data on liquid names is presented for 5 days and four weeks and anything seen can be ranked in tables or selected and charted (names, sectors, outperformance, etc).
We like the nifty interactive tables and charts. We welcome feedback on how to make it more useful going forward.

EQD | Nikkei 225 (NKY) MONTHLY Trajectories Analysis

The Nikkei 225 INDEX fell -5.77% during July and August (CC=-2). Currently the index is down for September: this month’s negative Close would be = CC=-3, a strong LONG signal.
The index reached a low = 31275.25 in August, right in the middle of the 32391-30600 support price band indicated in our previous MONTHLY Trajectories Analysis, 50%-75% reversal probability.
LONG Support levels are confirmed, in this insight we will analyze the new, re-calculated Resistance levels, to evaluate how far/how long the index could rise, if it rallies.

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Sep 10

Daily Brief Event-Driven: MVIS US Listed Semiconductor 25 Index Rebalance: Upweight for TSMC and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MVIS US Listed Semiconductor 25 Index Rebalance: Upweight for TSMC
MVIS Australia A-REITs Index Rebalance: Abacus Group Deletion Means More Outflow
Progress of Merger Between Celltrion Inc and Celltrion Healthcare & Appraisal Rights Issue
Omron Partial Offer for JMDC (4483) – The Engagement Is On! This Is the Script, This Is the Timing
MVIS Global Junior Gold Miners Index Rebalance: One Add, One Delete, Float, Capping = Big Impact
MVIS Australia Equal Weight Index Rebalance: Float & Capping Changes
MVIS Global Rare Earth/Strategic Metals Index Rebalance: One Add, Two Deletes & Big Turnover
MarketVector Vietnam Local Index Rebalance: Some Big Impact Changes
Index Rebalance & ETF Flow Recap: NKY, ASX, CSI300, KOSDAQ150, Yuanta ETFs, MVA, MVW, SMH
Newcrest Mining (NCM AU): Scheme Meeting on 13 October

MVIS US Listed Semiconductor 25 Index Rebalance: Upweight for TSMC

The upcoming rebalance of the MVIS US Listed Semiconductor 25 Index will be implemented on 15 September. There are no constituent changes, but there are float and capping changes.
The VanEck Vectors Semiconductor (SMH US) ETF tracks the index and has an AUM of US$9.7bn.
Estimated one-way turnover is 5.9% resulting in a one-way trade of US$595m. The stocks are extremely liquid, the impact on the stock in terms of ADV to trade is small.

MVIS Australia A-REITs Index Rebalance: Abacus Group Deletion Means More Outflow

As expected, Abacus Group (ABG AU) will be deleted from the MVIS Australia A-REIT Index at the close on 15 September.
Abacus Group (ABG AU) will also be deleted from the S&P/ASX 200 (AS51 INDEX) on the same day, so this increases the sell flow on the stock.
Estimated one-way turnover at the rebalance is 3.8% resulting in a one-way trade of A$23.8m. There are a few stocks with over 1x ADV to trade from passive trackers.

Progress of Merger Between Celltrion Inc and Celltrion Healthcare & Appraisal Rights Issue

By Douglas Kim

The appraisal right prices of Celltrion Inc (068270 KS) is 150,813 won (2.2% higher than current price) and Celltrion Healthcare (091990 KS) is 67,251 won (1.9% higher than current price).
Celltrion Inc has mentioned that the merger could be cancelled if the total amount of appraisal share purchase amount exceeds 1 trillion won.
Although some investors are likely to exercise their appraisal rights in this merger, we would attach a higher probability of this merger getting completed (80-90%+).

Omron Partial Offer for JMDC (4483) – The Engagement Is On! This Is the Script, This Is the Timing

In February 2022, Noritsu Koki (7744 JP) sold a chunk of JMDC (4483 JP) to Omron Corp (6645 JP) for nearly US$1bn. 7mos later, Omron supported a primary offering.
Now Omron is going to 50+%, as Noritsu Koki is getting out. Other investors have to participate for this to succeed.
The question of pro-ration may be a question of Elmer vs Mr Partridge. But Elmer has a point here.

MVIS Global Junior Gold Miners Index Rebalance: One Add, One Delete, Float, Capping = Big Impact

There is one add, one delete, one listing change, plus float and capping changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in September.
Estimated one-way turnover is 6.1% and that results in a one-way trade of US$240m. There are 31 stocks with over 1 day of ADV to trade from passive trackers.
There will be some same way and some opposite flows between the VanEck Vectors Junior Gold Miners ETF (GDXJ) and S&P/ASX 200 (AS51) trackers at the close on 15 September.

MVIS Australia Equal Weight Index Rebalance: Float & Capping Changes

There are no constituent changes for the MVIS Australia Equal Weight Index at the September rebalance. JB Hi-Fi Ltd (JBH AU) and Charter Hall (CHC AU) have avoided deletion.
Float and capping changes will result in a one-way turnover of 3.5% and in a one-way trade of A$69m.
There is a lot of short interest on stocks that will have passive buy/sell flows, but there will not be enough volume traded for shorts to use to reduce positions.

MVIS Global Rare Earth/Strategic Metals Index Rebalance: One Add, Two Deletes & Big Turnover

There is one add and two deletes for the MVIS Global Rare Earth/Strategic Metals Index at the September rebalance. Plus there are free float and capping changes.
One way turnover is estimated at 11.1% and will result in a one-way trade of US$58m. There are a few stocks with over 0.5 days of ADV to trade.
The inclusion of Sociedad Quimica y Minera de Chile (SQM US) and deletion of Zhejiang Huayou Cobalt (603799 CH) are surprises.

MarketVector Vietnam Local Index Rebalance: Some Big Impact Changes

There are no constituent changes for the index but there are float and capping changes that will be implemented at the close on 15 September.
Estimated one-way turnover is 3.3% and the one-way trade is US$21.5m. There are eight stocks where passive trackers need to trade over 1 day of ADV.
After large creations for Market Vectors Vietnam ETF (VNM US) at the start of the year, there has not been a lot of follow-on activity as the market moves higher.

Index Rebalance & ETF Flow Recap: NKY, ASX, CSI300, KOSDAQ150, Yuanta ETFs, MVA, MVW, SMH

The changes at the Nikkei 225 September rebalance were announced on 4 September. The rebalance of the HSI, HSCEI, HSTECH and HSCI was implemented on the same day.
The changes to the MVIS indices were announced on 8 September and will be implemented at the close on 15 September. The S&P/ASX family will also rebalance on 15 September.
After a month and a half of big inflows to onshore China ETFs, there were small outflows from a lot of ETFs during the week.

Newcrest Mining (NCM AU): Scheme Meeting on 13 October

Newcrest Mining (NCM AU)‘s IE considers Newmont Mining (NEM US)’s offer of 0.400 Newmont shares per Newcrest share + special dividend + FY2023 dividend to be reasonable but not fair.
The IE valued Newcrest at US$18.64-21.13 per share vs. the transaction value of US$17.10-18.70 per share. The sharp sector de-rating, including Newmont’s shares, has impacted the scrip-heavy offer.
The offer remains attractive compared to peer multiples, historical prices and VWAP exchange ratios. At the last close prices and for the 6 November payment, the gross/annualised spread is 1.2%/7.8%.

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Sep 09

Daily Brief Event-Driven: KRX BBIG K-New Deal Rebalancing: Official Results & Passive Flow Impacts and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

KRX BBIG K-New Deal Rebalancing: Official Results & Passive Flow Impacts
JMDC (4483 JP): Omron’s Partial Tender Offer
Newcrest: Shareholder Vote On 13th Oct
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Slowing Growth

KRX BBIG K-New Deal Rebalancing: Official Results & Passive Flow Impacts

After results were transitioned to non-public information, it has been observed that results are reflected in prices significantly later, with substantial price impact occurring close to the rebalancing trading day.
Even though the AUMs have recently decreased, the passive impact size is quite substantial, considering a recent pattern of price impact concentrating within a maximum of about two trading days.
A heavy Long-Short setup on these pairs, DearU / Douzone Bizon and SK Biopharmaceuticals / SK Bioscience (302440 KS), is something we should very actively consider.

JMDC (4483 JP): Omron’s Partial Tender Offer

JMDC (4483 JP) announced a partial tender offer for Omron Corp (6645 JP), the largest shareholder. Omron aims to make JMDC a consolidated subsidiary.
The offer is for a minimum of 12.0m shares (18.52% ownership ratio) and a maximum of 15.0m shares (23.08%) at JPY5,700 per share, a 22.4% premium to the undisturbed price.
Irrevocables (Noritsu Koki (7744 JP)) represent a 13.63% ownership ratio. While the offer is light, it will likely succeed as the minimum acceptance condition requires a 7.1% minority acceptance rate.

Newcrest: Shareholder Vote On 13th Oct